The European Commission has launched a consultation on how money managers and institutional investors could include environmental, social and governance factors into consideration when making decisions.
The consultation is public, and the commission is seeking comment from beneficiaries and retirement plan participants, pension and insurance providers, insurance companies, money managers, financial advisers, service providers such as those providing indexes and research, and law firms.
The consultation paper, "Public consultation on institutional investors and asset managers' duties regarding sustainability," follows up on a recommendation outlined by a High-Level Expert Group on Sustainable Finance in its interim report, published in July. One of the eight early recommendations was for the commission to clarify that the fiduciary duties of institutional investors and money managers explicitly integrate material ESG factors and long-term sustainability.
The commission is looking for opinions from interested parties to inform its impact assessment process. The work forms part of the commission's efforts to mobilize private capital toward green and sustainable investments related to a shift to a low-carbon economy. The consultation is open to comment until Jan. 28.
The consultation was welcomed by institutional investors and the Principles for Responsible Investment. "The PRI supports the consultation, it is consistent with our work on fiduciary duties, which we have been focusing on for the last several years," said Nathan Fabian, director of policy and research at the PRI, in a comment provided by a spokeswoman.
In a separate comment, also provided by the PRI spokeswoman, Claudia Kruse, managing director, global responsible investment and governance at APG Asset Management, said: "As a long-term responsible investor, APG welcomes the consultation on investor duties regarding sustainability launched today by the European Commission in connection with the work of the EU High Level Expert Group on Sustainable Finance. We invest on behalf of Dutch pension funds who consider it part of their fiduciary duty to take sustainability and governance factors into account, and reflect this in their investment beliefs and strategy. This contributes to risk-adjusted returns and aligns with beneficiaries' preferences. In our view, sustainability is part of investor duties since it is connected to long-term investment risks, and taking these risks more systematically (into) account will contribute to the robustness of financial markets."